USPS Should Keep Funding Future Health Care Costs, Republicans Say

By Eric Katz

March 13, 2014

Republican lawmakers voiced support for continued prefunding of U.S. Postal Service retirees’ health benefits at a congressional hearing Thursday, calling the payments necessary to avoid workers losing promised benefits or the costs being deferred to taxpayers.

A USPS official told the House Federal Workforce, U.S. Postal Service and Census Subcommittee that the agency’s total obligations -- including retirees’ health benefits and pensions, workers’ compensation, debt owed to the Treasury Department, benefits for current workers and other liabilities -- exceed its assets by $90 billion.

Current law requires the Postal Service to prefund health care costs for all retired employees and some of its current workforce. The payments were front loaded by Congress in 2006, and have placed a huge burden on the cash-strapped agency. USPS has defaulted on billions of dollars in payments over the last few years.

Frank Todisco, chief actuary at the Government Accountability Office, told the panel the Office of Personnel Management does not know how it would legally handle the hypothetical situation in which USPS could no longer afford payments to its retirees. In that scenario, retirees could possibly lose benefits, or “taxpayers could be brought in,” Todisco said.

The Postal Service’s Chief Human Resources Officer Jeffrey Williamson said by requiring eligible USPS retirees to enroll in Medicare, the agency would virtually eliminate its unfunded liability. A Senate oversight committee has cleared legislation that would do exactly that, and amortize outstanding obligations over 40 years.

Rep. Blake Farenthold, R-Texas, chairman of the House subcommittee, had two officials from the Defense Department testify on its unfunded liability and discuss its own prefunding requirement. Farenthold said postal advocates have maintained the Postal Service is the only federal agency required to prefund retirees’ health, and by showing the Pentagon also faces the obligation, they can “scratch that talking point off.”

The subcommittee’s Ranking Member Stephen Lynch, D-Mass., countered that juxtaposing Defense to USPS was like “comparing apples and oranges,” as the Pentagon receives annual appropriations from Congress to meet its prefunding requirement, whereas the Postal Service is almost entirely a fee-funded agency.

Democrats also argued USPS’ overpayment into the Federal Employees Retirement System -- which OPM has said is about $5 billion but the Postal Service’s inspector general has said is more than $12 billion -- should be returned to the agency and used to pay down its debts. The Senate bill included such a provision.

They also argued USPS’ debt should not trigger any reactionary measures to dismantle the agency.

“No one is talking about dismantling the federal government when it is $17 trillion in debt,” said Rep. Lacy Clay, D-Mo.